HIDDEN COSTS Export financing can pay for itself in countries where the export climate is favorable. In some countries such as China, where the economics currently work against U.S. exporters. U.S. exporters are at a disadvantage.

US-China Trade Trade Talks Produce No Results

Murky Future Ahead for the Bilateral Relationship

TRADE WAR? Trump MIGHT dial back measures against China, as he did with the steel and aluminum tariffs.

Sharelines

A US delegation visited Beijing in an attempt to avert a trade war.

US-China dialog resulted in an escalation of previous demands made by both sides.

The clear policy of the Trump administration is to reduce the US trade deficit with China.

A high-level United States delegation visited Beijing earlier this month as a first step in attempting to settle the trade disputes that divide the two countries and to avert a trade war.

But the delegation— US Secretary of the Treasury Steven Mnuchin, US Secretary of Commerce Wilbur Ross, US Trade Representative Robert Lighthizer, and Trade Adviser Peter Navarro—not only failed to produce any significant outcomes but left the meetings with an escalation of previous demands made by both sides.

It is the clear policy of the Trump administration to reduce the US trade deficit with the world and with China specifically. To that end, President Donald Trump announced in March tariffs on Chinese aluminum and steel imports. He followed that with the possibility of additional tariffs on $150 billion in Chinese goods as punishment for China’s practices on technology transfer, intellectual property, and domestic subsidies. Trump said he wants China to cut its trade surplus with the United States by $100 billion within 12 month.

The Chinese responded with a threatened $50 billion of tariffs on US products, which would be imposed if Trump made his threats a reality. It’s already been reported that China has ceased to take delivery of US soybeans. China is a major market for US soybean producers.

A leaked strategy document shows that the back and forth between the two countries has escalated the stakes, with the US doubling its previous demands during the negotiations and asking China to cut its trade surplus by $200 billion by 2020, 60 percent of China’s $336 billion surplus in goods and services trade with the US. The document shows that the US made additional demands, including the elimination of tariff and non-tariff barriers restricting US exports, and the elimination of subsidies to Chinese technology and manufacturing industries. Washington also wants China to drop its requests for consultations at the World Trade Organization (WTO).

For its part, China wants the US to drop the $50 billion in announced tariffs related to technology transfer and intellectual property and to recognize China treatment as a market economy in the WTO.

Experts note that the US demands must have meant to be rejected by the Chinese, paving the way for the Trump administration to proceed with the announced tariffs. It’s also possible that Trump will dial back some of his announced measures, as he did with the steel and aluminum tariffs. There will be a

public hearing on the proposed China measures on May 15 and the administration is accepting written comments until May 22. The administration may take as long as six months to announce a final decision.

That period could represent a cooling off period during which calmer voices will prevail and stopping the escalation toward an all-out trade war. One positive development on that front: Beijing and Washington have agree to continue their trade dialog, including a discussion of means to increase US exports to China.